Defense Spending Headed for a Big Boost

By Yuval Rosenberg

Happy Hump Day! Well, maybe not so
happy for emperor penguins, which a new study finds are nearly all

doomed for extinction by 2100. Here’s what else
you need to know this evening.

Defense Spending Headed for a Big Boost

The defense budget is on track for a big boost next year.

The Senate Armed Services Committee, evenly divided between
Democrats and Republicans, last month voted 23-3 to advance a $740
billion National Defense Authorization Act, endorsing a
$25 billion boost to the Pentagon budget compared
to what President Joe Biden proposed and a $37 billion increase
over the fiscal 2021 level.

Key Democrats now acknowledge that the defense budget will
likely go up in order to smooth the path to a broader budget
deal.

“People are looking ahead at the final budget resolution, and
the Republicans have made it clear that they’re not satisfied with
the defense number and they would require more,” Sen. Jack Reed
(D-RI), chair of the Senate Armed Services Committee,
said the other day, predicting that the additional
$25 billion will be included in the Senate appropriations bill. And
House Armed Services chair Adam Smith reportedly also said it’s
likely that his panel’s version of the National Defense
Authorization Act will provide more than Biden requested.

“The people who want to spend more than the Biden number have
built a lot of support, and yes, I think that [$25 billion
increase] is a potential bipartisan pathway,” Smith said, according
to
DefenseNews. “I don’t support it, I don’t think
that’s where we should go, but at the end of the day, I have one
vote.”

Key Republican looking for more: While Biden proposed a
16% hike in non-defense discretionary spending and a 1.6% boost on
the defense side, some Republicans have demanded that the defense
increase match that for non-defense, arguing that the Pentagon
needs the funding to properly prepare for the threats from China
and elsewhere. The $25 billion boost represents a 5% increase.

That “parity” likely isn’t in the cards, but Sen. Richard Shelby
(R-AK), the top Republican on the Senate Appropriations Committee,
said Tuesday that he wants an even bigger hike than the Senate
Armed Services panel recommended.

“Shelby’s comments show how the Armed Services Committee’s
overwhelming and bipartisan support for that bigger increase to the
defense budget might have raised the floor for defense spending in
behind-the-scenes negotiations — and Republicans certainly see it
that way,” Roll Call’s John M. Donnelly and Jennifer Shutt
say.

The bottom line: Democrats are divided over the defense
budget, with progressives pushing back against increases while
centrists are open to them. But it’s looking increasingly likely
that lawmakers will approve the $25 billion boost, though a bitter
partisan fight could still be ahead. “If a top-line boost is
unavoidable,” DefenseNews’s Joe Gould wrote this week, “it looks
like the next fight will be about how to spend it.”

McConnell Sets GOP Demands for Government-Funding Deal

Facing a fast-approaching deadline to keep the government funded
when the fiscal year ends on September 30, lawmakers jostled for
position Wednesday ahead of what could be a difficult and
contentious appropriations process this fall.

Senate Minority Leader Mitch McConnell (R-KY) warned his fellow
lawmakers that he wants to reach a full-year spending agreement
before working on specific appropriations bills.

“When it comes to floor consideration, we cannot and will not
start planting individual trees before we have bipartisan consensus
on the shape of the forest,” McConnell said during the
Appropriation Committee’s first markup session of the year.

McConnell said he has two requirements for moving ahead with the
appropriations process. First, Democrats must accept parity in
defense and non-defense spending growth — honoring what he called a
“long-standing bipartisan truce” on the issue — with the topline
figure set at a “responsible” level acceptable to all parties.
Second, McConnell warned against “poison pill” riders that
introduce provisions that are clearly unacceptable to one of the
parties.

Dems don’t necessarily agree: Appropriations Chair
Patrick Leahy (D-VT) said he thinks work can begin even without a
bipartisan, bicameral agreement on overall spending levels. “I am
not going to put forward an allocation at this time,” Leahy said.
“I believe that would only divide the Committee, and delay our
typically bipartisan work.”

Leahy added that he expects to continue working on the
topline spending level during the August break, and to hammer out
the individual spending bills when the Senate returns in
mid-September. That would leave the Senate with just 12 days to
work out a deal.

Number of the Day: $3.7 Billion

House appropriators included $3.7 billion in earmarks for
projects in their states in fiscal 2022 spending bills, according
to an analysis by Roll Call’s Jennifer Shutt, Ryan Kelly and Peter
Cohn. The total represents less than 0.25% of the more than $1.5
trillion in discretionary spending being allocated for next year,
far short of the 1% cap set by House Appropriations Chair Rosa
DeLauro (D-CT), Roll Call notes.

Democrats requested $2.3 billion, or 62% of the total, but Roll
Call points out that Republicans as a group “punched slightly above
their weight in the final tally, considering the GOP makes up about
one-third of members requesting projects in the 10 appropriations
bills eligible for earmarks.”

Democratic Reps. Peter DeFazio of Oregon and James Clyburn of
South Carolina topped the list of earmarkers by dollar amount, with
both topping $40 million. But most of the top individual earmarkers
are Republicans, Roll Call says, “despite the fact that not a
single GOP member voted for any of the seven bills with earmarks
that passed the House as a combined package last week.” Eighteen of
the top 25 top earmarkers — and eight of the top 10 — are
Republicans, led by Rep. Tony Gonzales of Texas ($38.9 million) and
Mike Johnson of Louisiana ($36 million).

The Senate is just starting to mark up its own versions of the
annual spending bills, and the fate of all those House earmarks
will depend on an overall agreement on spending levels.


Read the full story and see the list of top earmarkers at
Roll Call.

Quote of the Day

“We’ve grown used to America as the world’s pre-eminent
economic power. We aren’t destined to stay that way, but with these
investments, I believe we will. We have a chance now to repair the
broken foundations of our economy, and on top of it, to build
something fairer and stronger than what came before.”

— Treasury Secretary Janet Yellen, in prepared
remarks of a speech delivered in Atlanta Thursday.
Yellen credited the economic recovery from the Covid-19 pandemic to
the Biden administration’s “bold fiscal policy” and competent
execution, and she laid out an argument in support of President
Biden’s plan to spend roughly $4 trillion to solve long-running,
deep-seated problems in the American economy.

“These destructive forces – the decline in labor force
participation, the divergence in wages, the persistence of racial
inequality, and the rise of climate change – are different economic
challenges in some ways than the ones that came along with the
pandemic,” Yellen said. “They’re longer term, slower moving. But
they share something in common: Both are subject to our policy
choices. Fiscal policy can help unwind them. Or the lack thereof
can intensify them. And we know this because that’s exactly what’s
happened over the past 40 years.”

States Ending Unemployment Benefits Early Not Seeing Stronger
Job Growth: Analysis

In a bid to force more people back into the workplace, a group
of mostly Republican governors cut off federally enhanced
unemployment benefits in their states in June, weeks before the
program’s scheduled end in early September. Many economists
expressed doubts about the effectiveness of that strategy, arguing
that the situation in the labor market is extremely complex, with
millions of workers remaining on the sidelines for a variety of
reasons unrelated to unemployment benefits, including fear of
infection from Covid-19 and ongoing problems with schools and
childcare.

Although data is still coming in, the results so far suggest
that the elimination of temporary enhanced unemployment benefits is
not having the desired effect. According to a new
report from Homebase, which manages payroll and
other administrative tasks for small businesses, states that cut
benefits actually saw a slight decrease (-0.9%) in employment from
the middle of June to the middle of July, while states that did not
end the federal program prematurely saw an increase in employment
(+2.3%).

Some economists have argued that ending the benefits early could
have a negative effect, with the loss of income for thousands of
unemployed workers putting downward pressure on business activity.
Though it’s too early to answer that question definitively, it does
appear that eliminating the benefits is not helping employment.
“The evidence -- both statistical and anecdotal -- continues to
pile up that states which ended the UI expansion early didn't see
any kind of employment boon from it,” Bloomberg’s Joe Wiesenthal
tweeted.

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